In this week’s Real Estate News Brief… new trade war repercussions, a big dip in mortgage rates, and disappointing news for Equifax data breach victims.
We don’t have a lot of economic reports from this past week, but there’s a lot happening with the trade war and potential impacts on our economy. The situation with China has escalated rapidly — first with failed trade talks, then with President Trump’s call for new tariffs on Chinese goods. Trump wanted China to agree to buy U.S. agricultural products at the talks, but when that deal didn’t happen, he called for 10% tariffs on $300 billion worth of goods not yet subject to those duties. (1)
China then allowed its currency to weaken, which is adding fuel to the fire. By weakening the Chinese Yuan, the dollar becomes stronger and U.S. exports become more expensive. That increases China’s advantage in the export market. The stock market went wild when that happened with a huge sell-off. The Dow dropped more than 700 points, but as CNBC reports, stocks have been rebounding. However, China is threatening to weaken its currency even more, if the trade war drags on.
There’s also controversy over President Trump’s demand for a much bigger Fed interest rate cut than the quarter point cut in July. He wants the Fed to cut interest rates to lower the value of the U.S. dollar against the Chinese Yuan. The Fed is hesitant to do so because it needs to reserve some amount of flexibility in cutting rates for times of recession. We are not yet in a recession, although economists are saying the trade war could bring it on sooner.
In a survey of economists by Macrofin Analytics, they said the chance of a recession in the next 12 months has risen to 35%. That’s up from a previous risk level of 31%. Those economists also predict that the gross domestic product will average 2.3% this year, which is down from an earlier forecast of 2.5%. (2)
Mortgage rates also went down this last week. Freddie Mac says the average 30-year fixed-rate mortgage dropped 15 basis points to 3.6%. The 15-year fixed-rate average is just 3.05%. This is great for homebuyers and property owners who want to refinance.
In other news making headlines…
Fewer U.S. Foreclosures, But Some Markets See Increase
A new foreclosure report shows that U.S. foreclosures are down 18% from a year ago. The report by ATTOM Data Solutions says, the second quarter of this year is the 11th consecutive quarter of declining foreclosures. They are now down a total of 82% since their peak in the first half of 2010. (3)
The report also shows some foreclosure “flare-ups.” It says, they’ve increased in 36 of the 220 metros covered by the report this year. Topping that list of metros are Buffalo, New York and four Florida markets including Orlando, Jacksonville, Miami, and Tampa. That could provide new inventory in all those markets for other homebuyers and real estate investors.
FHA Lowers LTV for Cash-Out Refinances
HUD is tightening its requirements for a cash-out refinance which will make it harder to qualify for an equity loan. As reported by Realtor.com, the Department of Housing and Urban Development announced that it’s lowering the loan-to-value requirement from 85% to 80%.
The change is designed to lower the risk for the Federal Housing Administration.
FHA Commissioner, Brian Montgomery, says, “We are taking another important step to support sustainable homeownership that builds wealth for families.” The last time HUD adjusted the LTV requirement was in 2009 when it lowered it from 95% to 85%. The newest requirement takes effect on September 1st.
Too Many Equifax Victims Want Payout
The Federal Trade Commission is warning Equifax victims, they may be disappointed if they choose a cash payment instead of credit monitoring. Equifax agreed in a settlement over the massive data breach, to give victims free credit monitoring or a $125 cash payment. But so many people are opting for the cash payment, the FTC says, it’s “blowing up the math.” The Commission says victims may wind up with a much smaller payment and is urging them to choose the free credit monitoring.
Equifax has estimated that the breach impacted about 147 million people. That’s almost half of the U.S. population.
Big Rental Portfolio by Firm Linked to Facebook Founder Zuckerberg
An investment firm linked to Facebook founder, Mark Zuckerberg, is buying up rental properties in hot markets. The Wall Street Journal reports, the San Francisco-based Iconiq Capital has purchased more than 1,600 rentals since April, in Denver, Los Angeles, and Seattle. It also says that the firm is in the process of buying more.
The company manages investment funds for private clients like Zuckerberg as well as institutions. The Wall Street Journal says, clients can use the company to purchase things like private jets, or to manage expenses related to family finances, such as tuition. Zuckerberg reportedly used the company to buy two estates at Lake Tahoe last year. The company moved into real estate more recently, and is currently focusing on cities that are popular with young professionals and where rents are growing.
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